Understanding Indexed Universal Life (IUL): Cash Value and Death Benefit

In an Indexed Universal Life (IUL) insurance policy, the death benefit and the cash value are typically separate components. Whether the cash value gets added to the death benefit depends on the specific type of death benefit option chosen in the policy.

Level Death Benefit (Option A): The death benefit remains constant throughout the life of the policy. In this option, the cash value is not added to the death benefit. Instead, as the cash value increases, the insurance company uses it to offset the amount of pure insurance coverage, reducing the cost of insurance over time.

Increasing Death Benefit (Option B): The death benefit includes both the original face amount of the policy and the accumulated cash value. In this case, the cash value is added to the death benefit, so the payout to beneficiaries upon the insured's death would be higher as the cash value grows.

It’s important to carefully review the policy options and understand how the death benefit is structured in your IUL policy to determine what will be paid out to your beneficiaries.